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The majority of companies that have released their performance reports have shown that the economic meltdown was born as a result of soaring inflation.
The United States stock market is seeing a bullish revival today, complementing the rally that started on Monday, boosted by impressive earnings reports from Wall Street firms. The futures tied to the Nasdaq 100 went up by 2.32% while those tied to the Dow Jones Industrial Average (INDEXDJX: .DJI) went up by 1.83% with those linked to the S&P 500 index (INDEXSP: .INX) recorded a 2.02% growth on Tuesday morning.
Market Reaction to Fresh Earnings Reports
The futures performance is a reflection of what is happening to the major indexes as the Nasdaq Composite (INDEXNASDAQ: .IXIC) is seeing its best daily rally since July. The tech-heavy index is up 2.33%, or 249.22 points to 10,925.02. The S&P 500 has added 79.67 points atop a 2.33% growth to 3,757.62.
The Dow Jones Industrial Average is also coasting in the positive territory atop a 2.10% growth to 30,818.26.
The growth seen is reflective of how impressive investors are with respect to entities like Goldman Sachs Group Inc (NYSE: GS) recording a better than expected revenue. According to the Goldman Sachs report, its revenue came in at $11.98 billion.
Alongside other major banking firms, the poor performance in investment banking was compensated for by growth in other areas such as trading and equities.
Overall, the majority of companies that have released their performance reports have shown that the economic meltdown was born as a result of soaring inflation, and the Federal Reserve’s monetary policies to mitigate it has not proven as devastating to companies as projected.
“3Q and 4Q earnings should confirm fundamentals remain anchored in the resilient labor market and Covid reopening. Equity valuation will likely remain tied to global central bank rhetoric and rates, which is turning incrementally less negative. As such, we see equities primed for upside into year-end on resilient 2H22 earnings, low equity positioning, very negative sentiment and given more reasonable valuation,” Dubravko Lakos-Bujas, JPMorgan’s head of global macro research, said in a note to clients, adding that “Next year, however, we expect a more challenging earnings backdrop relative to current expectations.”
Nasdaq Composite and the Stock Market Not Out of the Woods
While it is very common for investors to assume that consistent growth in the stock market is a condition for a more prolonged bullish rally, it should be noted that the industry is not out of the woods yet.
With a few more weeks before the end of the year, the Feds will be watchful on how inflation will evolve, and will likely continue its aggressive hikes until the 2 to 4% range is attained. For the time being, both the regulators and the private sector will continue to keep an eye on the performances of businesses across different industries. This will shape strategies, operation costs, and other business decisions that will help companies stay afloat in the mid to long-term.